Equity Rally Being Tested as COVID-19 Cases Rise in the US and China; Watch Key Support Levels - Chaikin Analytics
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Equity Rally Being Tested as COVID-19 Cases Rise in the US and China; Watch Key Support Levels

SPDR S&P 500 ETF (SPY) has moved to a Neutral+ rating as the pullback (which I wrote was likely in this note last week) has begun. SPY continues to underperform the IWV (Russell 3000 ETF) but the intensity of underperformance is beginning to diminish. The OB  / OS Indicator has room to an oversold position and Chaikin Money Flow is bullish as the fund tests the long-term trend line. 

In last week’s note, I highlighted the potential for pullback in the near-term along with the importance of that pullback holding key support levels. The initial zone of support between $300 and $310 held on Thursday and Friday. Below that, the next important level is between $285 and $295. Should $285 fail to hold, the odds shift to further downside for the broader equity market. 

Small Caps

The iShares Russell 2000 ETF (IWM) has a Neutral Chaikin Power Gauge ETF Rating and continues to underperform the SPY. The OB / OS Indicator is moving lower, with room to an oversold position, and Chaikin Money Flow is bullish. The fund is above the long-term trend line and the Power Bar Ratio is bullish. 

IWM has faded from the $150 resistance level that I highlighted in these pages last week. Support is in the $120 – $125 range which marks the 61.8% and 50% retracements of the advance from the March lows. Should $120 fail to hold, the odds of a retest of those lows greatly increases.     

Fixed Income 

The iShare 7 – 10 Year Treasury Bond ETF (IEF) has a Bullish Chaikin Power Gauge ETF Rating and is lagging the SPY. The OB / OS Indicator is moving higher and in the middle of the range as Chaikin Money Flow remains bullish. IEF has regained the rising long-term trend line. 

Support is in the $118 – $120 range while resistance is in the zone between $123 and $124.  

A break higher in the price of treasuries as key equity ETFs test important support levels would be a sign that those support levels are likely to give way. 

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